Market Dynamics at Work: Consumer vs. Supplier

The pricing envelope is being pushed on the American Flyer side, too.  The latest round of American Flyer Legacy SD70's are essentially $600 MSRP.  That's about a 25% increase over when they were introduced in 2012. 

Even at the big discounters, they're running around $520, give or take.  Plus a scale guy like me also has to add in the price of buying a set of scale wheels, around another 30-40 bucks, plus shipping from Lionel.

Right now, I've been weighing exactly how much I want/need the MKT Heritage unit and currently it's looking like I need it less and less.

Rusty

Walmart did try selling starter sets here in Seymour ,IN but they must of not sold many as they only had them for one Christmas season.

Interesting subject, this thread.  One question though.  What does BTO mean in "O" scale talk.  In large scale it is Big Train Operators.

DP posted:

Interesting subject, this thread.  One question though.  What does BTO mean in "O" scale talk.  

Built To Order.

Thanks.

It is interesting to me that so many people are eager to purchase high priced items from the new catalog while they ignore new in the box items from previous catalogs on the secondary market that have huge discounts.  

A major reason that both Lionel and MTH can charge relatively high prices is that they are the only mass market manufacturers of quality 3-rail trains left.   3rd Rail and Williams by B. are targeting totally different markets than Lionel and MTH.  

Competition from K-Line and Weaver helped to keep prices in check in the past.  K-Line was especially good at producing and marketing excellent trains and sets at attractive price points.  Both K-Line and Weaver are gone.   Perhaps this means that Lionel's and MTH's pricing was the best O strategy to sustain a viable business.

NH Joe

I have to agree with the original post regarding the Steel City Switcher set.  The 0-8-0 engines are in the catalog for $899 and the set is $1,299.  That's $400 more for 4 pieces of rolling stock that sell individually for less than $100 each.  I would love an explanation from Lionel what we have to pay EXTRA for the set.

I purchased the MTH Long Island Consolidation Specialty Freight set from the 2015 volume I catalog.  The set cost $1,049.  The individual 2-8-0 H10s engines on the same page cost $899. 

So, for $150 more I got 5 flat cars with crate loads.  When you are buying multiple items (a set) there should be a discount like MTH had, not a price increase.

The Lionel Steel City set price is going a long way to making me stop buying Lionel, and it's made me angry.

Thus is the result of pricing yourself out of the market. The new catalog releases are to be applauded. However, I am at a point where instead of one, two or 3 big items I purchase a year, I am still working on one item a year that is still in layaway (The vision line Big Boy).

I would like to buy the new Allegheny, the GS-4, the UP excursion passenger set, a PRR broadway limited Passenger set, the C&O T-1 Chessie Special, and a few sound cars. But total that up and I could be driving away in a used car!

I have been waiting for these re-releases for years... but all at once, and for a much larger price?

No, I have to put food on the table, and I rolled the dice with BTO on the Big Boy. And I won....

Strategically, as a consumer I will have to pin point what will sell out and not be available. That is what I will buy/order.  My guess is the UP excursion set, the vision line sound cars, and the PS1 sound cars.... the rest can wait.

 

Rocky Moutain,

   David I agree with you 100% nostalgia only goes so far with me when I purchase now.  I really like the GG1 Engines, my memories of riding behind the big silent powerful engines always make me look at the new offerings as they are engineered and sold.  However a little while ago the prices for the new Legacy GG1 had me shaking my head, just could not believe Lionel decided to price them right out of the market for me.  Here is the bottom line, I already own 2 MTH P2 GG1's that are just fantastic runners, slow speed control to the max, I also own 2 old Williams Conventional GG1's that have the pulling power of a D9 Cat, especially when operated via the TR Z4K mode.  As I indicated in another other post, Lionel must think we are some kind fools, to offer us another GG1 at the price of a modern VW Car. Nostalgia only goes so far, as much as I would like to own a new Legacy GG1, Purgatory  will freeze over before I spend that kind money on a new GG1 engine that I already own 2 of the MTH P2 versions of, along with 2 Conventionals.  Someday I will probably pick a used one up, for about 1/3 the original cost.  I also think the same way about the Lionel ZW-L transformer.  Repeat after me, these are Toy Trains, Toy Trains, Toy Trains, a Childs play thing.

PCRR/Dave

Wow So many experts --- this is crazy Do we really think we are some kind of "majority" in the world of Lionel This comes up often And yes of course they listen But there are a LOT of train guys that do not even know what the ogrforum is Tons of them at York --- lots of them placing orders right now At the local train store last week couldn't believe how many orders they are getting Not necessarily million dollar stuff but things like vision line reefers, middle of the road rolling stock, etc The GG-1 seems popular Every time new catalogs come out I'm happy we have all these wonderful choices --- go back and look at some of those MPC catalogs from the 70's and 80's --- ouch Everyone's entitled to an opinion of course But I still think the glass is half full Joe S

Sorry about the lack of punctuation Just sent this from my new iPhone 6 something--- probably not set up yet Thx

dorfj2 posted:

Wow So many experts --- this is crazy Do we really think we are some kind of "majority" 

I think theres a fairly good sampling of folks here. Not to mention far more read and never chime in.

I think the main thing is  the "key players"( Mike Reagan/ Rudy Trubit / Jon Z.) at Lionel interact directly with "us" the customer base on this very forum.

This is a good place to get a message across.

There were a number of "experts" that expressed their dissatisfaction with the removal of whistle steam from premium locos.

Low and behold, a year later it magically returned, even though Lionel claimed that the whistle steam did not sell more locomotives which was the reasoning for pulling it in the first place.

Other things have also been addressed here, i.e. the sounds of certain locos made more accurate as suggested by resident prototype "experts".

The glass may be half full but the wallet definately is not

Having said all that, maybe we're missing the mark anyway. Maybe this is just Lionels way of reducing sales so things can ease up on the warranty dept.

 

I detest the words "Price Point"

My last pre-order for an Atlas car will be my last (other than the GGD Silver Meteor set ), I simply don't see anything coming out that is that important anymore.

It's like waiting at the airport to get on a flight, I don't mind flying but sitting around waiting drives me

dorfj2 posted:

Sorry about the lack of punctuation Just sent this from my new iPhone 6 something--- probably not set up yet Thx

I don't know how representative we are as a Forum relative to Lionel's overall market.

But we are passionate....and typically spend a considerable amount of $$$ on the hobby.  I would opine that if the current pricing model used by Big Orange is generally being viewed unfavorably on this Forum, then it's probably (but by no means absolutely) the same sentiment felt by their overall customer base.  Obviously, I have no ability to prove this or to assume that this is fact.  I may possibly be wrong....but I (humbly) doubt it.

But part of the point is that there isn't this type of complaining or disappointment felt towards MTH or 3rd Rail's pricing.  I, personally, consider MTH vs Lionel a very apples-to-apples comparison....plus or minus Whistle Steam....and I've historically been a Lionel guy.  I see the current prices and I'm simply miffed.....and not planning on buying anything before it hits the secondary market.

Guys - here's my take on it for what it's worth .  After dipping my toe in the scale waters thinking it would be fun, I decided to go back to all PW.  There were a whole bunch of factors, but bottom line is trains are a major part of my life, but not my whole life. In the end, I have wife, 2 kids, 1 on the way in a few months, a mortgage, car payments, bills, etc.  I can probably swing a few of the high priced items, but a voice in my head tells me I'm nuts to pay that. I know I can't be the only one. In the end, I want to enjoy a beer & watch the trains go around the layout or enjoy them w/ my young kids. I'm sure there are people who can afford tons of this stuff & it's great if you can, but I think the average person can't really pay these prices.   I remember going to the lhs w/ my pop around 2 times a month when I was younger & picking up a boxcar or other rolling stock.  Not so easy to do when the boxcars are priced at 80-100 each.  IDK what my point really is, lol, but I think the prices & the whole BTO model is just a turnoff for a hobby that is supposed to be about fun & family time ( in most cases).  The BTO model forces you to place orders if you want the item(s) & none of these are cheap, rather than 'I'll just pick it up when I get some extra cash'.   It is possible to enjoy the hobby on the cheap - used trains, decent postwar & MPC etc, but most new people don't know this - they look at the catalog, see the prices & perhaps it doesn't get further than that.  

Hi Guys!  Lots of passion here.  I agree with Marty regarding David's insightful questions about pricing.

China is not a super low cost provider anymore and as they convert more of their economy to domestic consumer production, costs will continue to rise. 

I also see Lionel's ongoing commitment to customer service, so if you have a problem with a new engine, they will take care of it.  That is worth something, especially since that repair work is done in the USA. How  much that service is included in your engine price, I don't have a clue, but an example of  service costs could be this:  I have been looking at new HD TVs.  There is one at Best Buy for $1399;  the two year protection program is $169.  

I have no interest in buying used engines that I can't repair, so its an easy choice to stick with new equipment.  I also stay away from the engines that only run on 72 inch curves, so the super high end items are nice to look at, but I am not a buyer.  That said, I do see some nice items in the latest catalog, including the UP passenger cars and the SD90 MAC. 

 

 

I never pre- order anything after being disappointed in the past. Better safe than sorry and it usually turns up at a better price.

Well I guess I should clarify my position. As much as I respect David's opinion and insight he's no more qualified than me to run Lionel. With all the figures and     emojis, we have no inside knowledge of Lionel's inner workings and costs.  It is all speculation which may or may not be accurate. 

Various opinions are why the forum functions so it is great to hear all the inputs. 

RickO posted:

I think theres a fairly good sampling of folks here. Not to mention far more read and never chime in.

Yep, if you look at the main page, there's usually at least twice as many guests lurking as there are members logged in.  I know for a fact that some of the folks who have stopped posting here still lurk, as I get emails from them from time to time.

The reason I haven't bought any Lionel steam engines is because they haven't made anything I want yet, if they ever make an accurate Seaboard steamer then I may be in trouble

Brewman1973,

The cost of a product warranty extension plan has nothing to do with the cost of "post sale" service.  Most of those plans are just increased profits for the retailer because they know from experience that less than 2% of electronic sales will develop fixable problems in the first 3 to 5 years.  At that rate, unless the problems that do arise are easily diagnosed and easily fixed, it is cheaper to give the customer a new product and trash the broken one.

Chuck

Well I just ordered a 2016 BMW M4 on Saturday so my bank account took a serious hit, so if Lionel's prices keep going up like this I will be cutting way back on purchases.  I usually buy at least a few engines per catalog.  For 2016 its just going to be one.  Just too much money.  Plus if I decide to model a different road name or whatever and want to sell it then you are always taking a pretty big loss because of decreased buyer pool every year and people just not wanting to shell out big bucks.  Even BTO items don't really hold their value (with a few exceptions).  Trains are only allowed so much of my budget.  I really think its going to be about BTO sales.  As long as those BTO orders keep coming in, there is no reason to adjust their pricing.   But I don't know all the financials in the background of Lionel's business.  To make a profit and pay everyone, expenses, etc,  this may be what they need to charge and maybe previously they were just getting by with slim profits and management has basically made a decision to actually make some real profits.  Its all conjecture.

SandJam posted:

Well I just ordered a 2016 BMW M4 on Saturday so my bank account took a serious hit, so if Lionel's prices keep going up like this I will be cutting way back on purchases.  I usually buy at least a few engines per catalog.  For 2016 its just going to be one.  Just too much money.  

How much of a hit will you take when you drive the new Beemer down the road and it is "used"  ??/

jim pastorius posted:

How much of a hit will you take when you drive the new Beemer down the road and it is "used"  ??/

Probably enough to buy a few big Lionel steamers... and of course, the Steel City Switcher  too!!!  

Enjoy the ride, Sandjam...  That's a lotta toy train purchases!!!     On second thought... Perhaps not that  many.  

David

MartyE posted:

Well I guess I should clarify my position. As much as I respect David's opinion and insight he's no more qualified than me to run Lionel. ...

Marty, neither of us would enjoy it.  We'd never have time to enjoy our trains as a hobby anymore.    But I'd do it for a year just for the salary!  Heck, I might even do the job for half of what Howard is getting paid.    Probably save Lionel a few bucks right there.   

David

SandJam posted:

Well I just ordered a 2016 BMW M4 on Saturday so my bank account took a serious hit, so if Lionel's prices keep going up like this I will be cutting way back on purchases. 

Just too much money.   

But I don't know all the financials in the background of Lionel's business. 

I like Sandjam's post.  In it, note how someone who just bought a new BMW M4 (which is a fine, fine automobile!) is complaining about Lionel's current pricing.  Likewise, many of us who have been shelling out $800-$1,100 on scale steam for years have now reached our breaking point and are saying "Nice....but no thanks." 

Hey...I understand that it's a free country and none of us have to buy these products.  But, in some strange way, one starts to feel excluded at these high price points.  That's where I think some of the "bad blood" comes from.

And yes....every business needs to make money to survive in the long term.....and since Lionel is privately held, there is no way to truly know how much profit or loss they are generating.  But I will wager that their cost structure is very similar to that of MTH.  Lionel's FEF shouldn't cost that much more than MTH's FEF....other than a reasonable premium for whistle steam.  Conversely, Lionel's scale steam shouldn't be in the same zip code as 3rd Rail given how much more detail is in a 3rd rail engine, the licensing fee that 3rd Rail has to pay for Lionel's command control, and the fact that economies of scale should make larger production runs cheaper on a per unit basis.

Just my two...or three cents....this morning.  Life obviously goes on.

Berkshire President posted:

SandJam posted:

Well I just ordered a 2016 BMW M4 on Saturday so my bank account took a serious hit, so if Lionel's prices keep going up like this I will be cutting way back on purchases. 

Just too much money.   

But I don't know all the financials in the background of Lionel's business. 

I like Sandjam's post.  In it, note how someone who just bought a new BMW M4 (which is a fine, fine automobile!) is complaining about Lionel's current pricing.  Likewise, many of us who have been shelling out $800-$1,100 on scale steam for years have now reached our breaking point and are saying "Nice....but no thanks." 

 

I think Lionel should include whistle steam in all LC+ engines..    And more detail cause LC engines look like toys, not models.  And more control options ...  And don't forget sound because its crappy when compared to their high end stuff..    And what about price???   Do we even need to discuss that?

Oops, I forgot.  This is a captured market and we should take what we can get... And be thankful at any price.....and and and.....

Joe 

jim pastorius posted:

How much of a hit will you take when you drive the new Beemer down the road and it is "used"  ??/

HAHA, my point was that there are other things in life that cost money and to enjoy and once I thought about it, 10 high end Legacy Engines was like a 15,000 down payment on my M4.  That sort of really opened my eye on how much these trains costs and how easy it is to buy these trains all the time and not realize how much its really costing.  So yes for me, Lionel prices are starting to sink in and I am cutting back.  I have a lot of engines so I have plenty to run.  A business always needs to grow, so consumers need to want to keep buying and prices can make a difference.

 

MartyE posted:

Well I guess I should clarify my position. As much as I respect David's opinion and insight he's no more qualified than me to run Lionel. With all the figures and     emojis, we have no inside knowledge of Lionel's inner workings and costs.  It is all speculation which may or may not be accurate. 

Various opinions are why the forum functions so it is great to hear all the inputs. 

Who says us three are not qualified to run the company?  Was with about 50 "O" train guys this week and the consensus was "BTO" has been happening all along. To quote one, "Who would produce 500 engines when you only have reservations for 35?" Most think the actual production costs are way lower than we've been lead to believe. When they add us to the payroll I'll start to worry about it!

I could tell you the Santa Fe 3751 and the Chicago and Alton sets weren't BTO, because if they were , somebody miscounted.

 

rat

 

SandJam posted:

jim pastorius posted:

How much of a hit will you take when you drive the new Beemer down the road and it is "used"  ??/

HAHA, my point was that there are other things in life that cost money and to enjoy and once I thought about it, 10 high end Legacy Engines was like a 15,000 down payment on my M4.  

 

Ha ha, I was thinking I could buy 3 of my Toyota Camrys for the price of your Bimmer, and I'd still have at least $5000 left to spend on trains

BobbyD posted:

... Was with about 50 "O" train guys this week and the consensus was "BTO" has been happening all along. ...

Perhaps that's true for Atlas-O, MTH, and of course 3rd Rail.  But no way Lionel has been BTO all along.  Lionel just made a much bigger fanfare of going BTO when they finally decided to follow other importers down that path. 

It'll be very interesting to see which item has the dubious honor of being Lionel's "first cancelled BTO product".  Perhaps this year it will happen... and I wouldn't be surprised if it's the Steel City Switcher, although there are a few other potential candidates too.  The other importers have had their share of "cancelled products" due to lack of pre-orders from time to time.  It comes with the territory.

For purely selfish reasons, I wish the Steel City Switcher  were not  a BTO item.  Then Lionel would produce it... and most likely be forced to adjust the price downward to get more folks to buy.  As it stands now, I'd be surprised if Lionel even receives enough orders to go forward with it.    I might have better luck grabbing one of the separately-available 0-8-0's "on sale" and re-letter it for Bethlehem Steel.    There are always  alternatives.

David 

RickO posted:

SandJam posted:

jim pastorius posted:

How much of a hit will you take when you drive the new Beemer down the road and it is "used"  ??/

HAHA, my point was that there are other things in life that cost money and to enjoy and once I thought about it, 10 high end Legacy Engines was like a 15,000 down payment on my M4.  

 

Ha ha, I was thinking I could buy 3 of my Toyota Camrys for the price of your Bimmer, and I'd still have at least $5000 left to spend on trains

Before we poo poo the M4, has anyone priced out a new Colorado, Silverado, or F-150 pick up truck lately?

Throw in 4WD and a big cab, and you're around 40K.....for a pick up.  And I can't blame Lionel for any of it!  

I was just jagging SamJam a little. Car prices are ridiculous too. Like I said earlier, my last new, BTO car was a real, honest-to- gosh  69 Z28.  Most everyone here doesn't really know what a true, original Z28 was.  $4,000 and I could tune it and work on it in my driveway.  It blew the doors off many  "hot" cars in its day.  Cars are like trains-a lousy investment, so enjoy them.

jim pastorius posted:

I was just jagging SamJam a little. Car prices are ridiculous too. Like I said earlier, my last new, BTO car was a real, honest-to- gosh  69 Z28.  Most everyone here doesn't really know what a true, original Z28 was.  $4,000 and I could tune it and work on it in my driveway.  It blew the doors off many  "hot" cars in its day.  Cars are like trains-a lousy investment, so enjoy them.

My current '69 Malibu originally cost $2,900 and change....but it was lightly optioned.  The 1969 Z28 option was a decent premium/upcharge....probably around 20-25% if I had to guess.

jim pastorius posted:

 Cars are like trains-a lousy investment, so enjoy them.

Can't take it with you, and money in and of itself certainly isn't any fun

If you want to see how well the Lionel Legacy BTO items are moving just do a search on E bay of Lionel Legacy.  Same items and the same dealers trying to get just about full retail for them.  If they can get people to bite all well and good but seems like no one is biting and you see the same items relisted time and time again.  Dealers must have a large inventory.  I wonder what their price is from Lionel?

Berkshire President posted:

Before we poo poo the M4, has anyone priced out a new Colorado, Silverado, or F-150 pick up truck lately?

Throw in 4WD and a big cab, and you're around 40K.....for a pick up.  And I can't blame Lionel for any of it!  

Don't mean to derail Dave's thread, but easily 40K.  And, let's not even talk about a Tahoe or a Z71 package....

Vehicles and trains are the worst purchase you can make from a financial stand point.  You're always going to loose money. 

That's why I drive older vehicles and buy trains on the secondary market-I still take a hit, but it's limited compared to purchasing new.  Let someone else take the epic-self induced-bad decision choice. 

And, like Dave, I believe Lionel is going to have a hard time moving the Steel sets.  Not sure they'll make it honestly.

At one time in the sixties, Lionel pretty much had the O Gauge market to themselves.  Due to poor quality, market dynamics, technology constraints, lackluster product line, etc.  some competitors crept in like K Line, MTH and now Menards.   All of us are free to jump into the market and start a business producing trains at the price point we desire. 

Unless you have a monopoly, the market place will ultimately decide how much these trains are worth.  Just ask all those MPC, LTI, Postwar and Prewar collectors that had their collectible trains re-issued over and over.  To be sure, the OGR readers are part of the O Gauge market place.   I'm just not sure how much of the market or how dominate they are.

Similar to the 47 people in the York thread last Oct-Nov saying they were boycotting the York show.  You still have 12,500 that were happy or content that they went.  Now come April 2016, if the York attendance numbers are way down then we will know that those 47 people truly had an effect on the York train show market.

RickO posted:

SandJam posted:

jim pastorius posted:

How much of a hit will you take when you drive the new Beemer down the road and it is "used"  ??/

HAHA, my point was that there are other things in life that cost money and to enjoy and once I thought about it, 10 high end Legacy Engines was like a 15,000 down payment on my M4.  

 

Ha ha, I was thinking I could buy 3 of my Toyota Camrys for the price of your Bimmer, and I'd still have at least $5000 left to spend on trains

Jim,

There is more to life than trains. The M4 is a great car and Sandjam should really enjoy it. If I could afford one I would buy it but I'm happy for people that do.

This is what makes America great, buy what you want and can afford. I know I would like the M4 rather then three Camry's any day.

Life is too short, enjoy life, buy the best you can afford. 

Dave